Income and life satisfaction: an analysis of determinants applied to Brazilian data of 2014

Abstract

In general, it is believed that higher levels of income enable higher levels of well-being. Conversely, studies of positive psychology have consistently shown that higher levels of well-being are predictors of higher earnings. One of the largest challenges in studies that analyse these associations is the problem of circular causality and endogeneity. Taking this into account, the determinants of income and the determinants of life satisfaction were analyzed. The results indicated that associations between life satisfaction and income and relationships between income and satisfaction with life were significant only in models with a smaller number of controls. Variables such as educational level and independence at professional activities were significantly associated with income. In the case of life satisfaction, variables such as health level, religiosity and control over one’s own life had significant associations with well-being.